Bluebird vs. GoBank: The Rise of the Non-Bank

NEW YORK (MainStreet) — Alpesh Chokshi has a money-saving tip for you, but the big surprise is the source: While Chokshi is a senior executive with American Express, a card long associated with the well-heeled, his target is decidedly the 99%. His message goes like this: If you are paying checking account fees, there is a cheaper way. A way that may cost you absolutely nothing for all the banking you need. American Express calls its product Bluebird.

Steve Streit, CEO of Green Dot, the prepaid card mammoth, has a similar message, because his company recently introduced GoBank, which is aimed squarely at consumers who are fed up with overdraft fees and other dings on their financial well-being.

Probably the most obvious difference between these non-banks, as industry shorthand pegs them, and traditional banks is what happens with an overdraft. Regular banks hit their customers with fees — often $30. Just for declining a check.

Bluebird charges zip. So does GoBank.

Also, both will rake in new customers with histories of bounced checks. “What you did in the past doesn’t matter to us,” says Lewis Goodwin, who heads the Green Dot bank group.

Call today the age of the non-bank — institutions that strip out the pomp, ceremony and fees of traditional banks. A year ago, Bank Transfer Day, the consumer movement to shift funds from big banks into credit unions and community banks, won lots of ink. But in 2013 the real gamechangers have come along, and these are financial institutions that do much of what traditional banks provide but with a radically downsized fee structure.

Bluebird promises no annual fees and has a user interface that makes it difficult to incur any fees, especially if the consumer has direct deposit of a paycheck or similar into his or her account. (Without direct deposit, there is a $2 fee per ATM withdrawal. With it, the network is free to Bluebird users.)

What does Bluebird not have? There are no branches, although there are Bluebird services available at many Wal-Mart stores, with Wal-Mart serving as a partner in the venture.

In late March, because of consumer demand, Bluebird introduced paper checks, which the company did not offer in the service’s first six months.

“We see many consumers using Bluebird as their primary checking account,” Chokshi says. “By leveraging mobile technologies we can deliver the banking people need at much lower cost.”

Streit, at GoBank, has even dispensed with the storefront presence. Other than a single branch in Provo, Utah, there is no bricks-and-mortar storefront for GoBank, and Streit does not see that changing. “Our appeal is to a mobile, high-tech generation,” Streit says. He says he does not envision a time GoBank would issue paper checks.

But GoBank customers can pay bills online, do remote deposit capture and pretty much anything a Bank of America or Wells Fargo mobile banking customer can do, without the monthly fees, at least for now. In a few months Streit intends to begin letting GoBank customers pay the monthly fee they wish, but $0 will remain an option, he said. He added: “We actually think many people will pay us.”

But those fees, if any, will remain less than the double-digit charges imposed by most big banks on customers who don’t carry hefty balances.

Are these products any good? Anisha Sekar, a vice president at review site NerdWallet.com, was positive about Bluebird.

But she has quibbles. On point of sale transactions, for instance, Bluebird users — unlike traditional debit card users — cannot get cash back. But, she stressed, Bluebird offers premium features such as purchase protection for items bought with the card that just are not associated with the lower end or even the middle of the checking card market.

As for GoBank, banking analyst Peter Olynick with Carlisle & Gallagher, a Charlotte, N.C.-based consulting group, called it “a welcome addition to financial services.” His belief: It will appeal to plenty of customers who find it delivers the banking services they want at prices they find palatable.

The better news: just about every bank now is looking at ways to strip out some services so they can afford to offer frugal consumers services at sharper price points — call it the emergence of just-in-time banking, where you buy only what you need, when you need it.